Tax obligation of foreign contractors in Vietnam ?

A foreign company (company A) has signed a general EPC contract with an other foreign company (company B). Company B is the investor of a BOT project (Build-Operate-Transfer project) in Vietnam, the foreign company B shall pay the foreign company A by TTR method (Telegraphic Transfer Reimbursement) and L/C (Letter of Credit) from the bank in the country where the foreign company B is located, for works in the general EPC contract implemented by company A. Invoice for goods issued by company A shall be sent to company B’s the bank. Goods shall be delivered by company A to company B at the BOT project’s site in Vietnam. In this case, is the foreign company A required to pay foreign contractor tax (FCT) in Vietnam?   

DMS Lawyers in Danang, Vietnam advise on tax obligation of foreign contractors in Vietnam ?

Foreign Contractor Tax (FCT) obligation in Vietnam:

Foreign entities providing goods in Vietnam in the form of domestic export and earn income in Vietnam under contracts between them and Vietnamese companies (except for cases in which goods are processed and then returned to foreign entities) or distribute goods in Vietnam or provide goods under Incoterms rules that require the sellers to be responsible for goods that have been taken into Vietnam’s territory (Clause 2 Article 1 Circular No. 103/2014/TT-BTC dated August 6, 2014).

Therefore, in case the foreign company A distributes goods in Vietnam or provides goods under Incoterms rules that require the sellers to be responsible for goods that have been taken into Vietnam’s territory, company A shall subject to Foreign Contractor Tax (FCT) in Vietnam. 

In case the foreign company B implements BOT projects in Vietnam, in the form of setting up a company in Vietnam (the Vietnamese company) in accordance with the Law on Investment, such Vietnamese company signs contract to import machinery, equipment with the foreign company B or other foreign company (company A) in which goods are delivered at Vietnam’s border checkpoint without ancillary services in Vietnam, then the foreign company B or the foreign company A shall not subject to foreign contractor tax (FCT) in Vietnam (Clauses 1, 2 Điều 2 Circular No. 103/2014/TT-BTC dated August 6, 2014)./.

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DMS Law firm in Vietnam
Director
(Signed)
Lawyer Do Minh Son